Tuesday, June 25, 2019

NDAA 2020 - Cost or Pricing Data Required to Support Commercial Pricing

Well its that time of the year when we begin to follow the NDAA (National Defense Authorization Act) process. Both the Senate and House have their own versions of the bill. After they pass them in their respective bodies, it goes to a compromise committee comprised of both Senate and House members, voted on by both and eventually to the President's desk for signature. Not all provisions will survive. Some will be eliminated. Others will be watered down. Nevertheless, it is interesting to see what legislators are thinking about when it comes to contracting matters. We will be covering various NDAA 2020 provisions periodically from now until it becomes law.

Today we begin with Section 803 appearing in the House version.

Is the Government getting hosed on commercial item purchases? Many people think so and can point to anecdotal evidence of that happening. In theory, buying commercial products makes sense and can save a lot of time and money. But the FAR definition of "commercial item" is quite broad (see FAR 2.101) and the product or service doesn't even need to be actually sold to the general public - it only needs to have been offered for sale to the general public.

Last year, GAO issued a report concluding that DoD's process for determining whether an item can be purchased commercially - and at a fair and reasonable price - is often long and challenging. One of its findings is that DoD was unable to obtain contractor data when adequate market information was not available. Ultimately, contracting officers need to determine that a price is fair and reasonable to the Government, irrespective of how the product or service was priced.

Section 803 attempts to deal with that problem by requiring contractors proposing commercial items to also provide cost or pricing data to the contracting officer when, based on market research, that item will be solely procured by DoD. (This begs the question that if an item is only procured by DoD, how can it be a commercial item?)

If an offeror fails to comply with the requirement, the Secretary of Defense may suspend or debar such offeror or include a notation on such offeror in the system used by the Federal Government to monitor or record contractor past performance.

So commercial item contractors may be requested to furnish cost or pricing data or face being written up in the past performance rating system.

Another element to Section 803 is the threat of a should-cost review before DoD enters into a contract to procure such a commercial product.

The Director of DCMA shall identify which commercial products should be analyzed under the should-cost review process before the Secretary of Defense enters into a contract to procure such a commercial product. Read about 'should-cost' reviews here.

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